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An economy of money shufflers
How America can stop making cars forever
2004.10.21 — Business | Jobs | Economics | by Barton Castor
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High finance. |
This month's US News & World Report features an article by "Funny Money" columnist Jodie T Allen this month that demonstrates Allen's—and perhaps her publisher's—fundamental misunderstanding of economics. In it, Allen quotes the National Association of Manufacturers (NAM) and Bridgewater Associates on the state of manufacturing and the American economy in general. And they all get it wrong.
Well, to be fair, outgoing NAM president Jerry Jasinowski doesn't get it all wrong. He points out that US manufacturers have bounced back pretty well from the downturn that started in 2001 (or 2000, if you were a stock market investor). But Jasinowski joins Allen and Bridgewater in lamenting the general state of manufacturing in America, as if working in a steel mill were the best of all possible jobs.
...as if working in a steel mill were the best of all possible jobs. |
Jasinowski is specifically quoted in regard to China, Singapore, and South Korea.
Their governments are all working to promote business.... I was struck by the way they are investing so much in the capitalist system. [emphasis in the original]
Does Jasinowski think that Washington is an enemy of industry? To the contrary, the Bush administration and its predecessors have been good for US industry, helping to keep it honest and competitive while opening up trade with isolationist economies in Asia and protecting it from anti-competition regulations in Europe. Sure, the Clinton administration failed to police corporate finances and got a little too casual about free trade with Mexico, but those are minor hiccups in the new economy.
[I]f American labor wasn't in such high demand, we wouldn't have the high salaries we do. |
But the worst example of economic handwringing occurs in the closing paragraph of Allen's piece, when she quotes Bridgewater Associates.
A situation in which China and India "do our manufacturing for us and have us shuffle their money for them," the firm warns, "can't go on forever...."
Are they pulling our collective leg? Or are they really ignorant of fundamental principles of economics... like the division of labor?
Imagine the mayor of New York City saying something similar about his state. "A situation in which Michigan and Ohio do our manufacturing for us and have us shuffle their money for them can't go on forever."
That's so obviously false that it's laughable... |
That's so obviously false that it's laughable, yet we buy the idea that it's true of international trade simply because it stretches across our national borders. China and India, with populations over 1 billion each, have an overabundance of unskilled labor. America has a great wealth of money, technology, and ingenuity. It only makes sense that as New York City has become the finance capital of the US, America can become the finance capital of the world.
If everybody in the world wanted American poetry, we could all be poets.... |
America's money is the driving force of the world economy. Everybody wants dollars, so they're willing to sell their labor cheap to get them.
The Chinese even peg their currency against the dollar at an artificially-low rate. That makes Chinese goods cheap to us, but robs workers in the People's Republic of the higher price they could be asking us to pay.
If everybody in the world wanted American poetry, we could all be poets (except for the talentless few who would flip our burgers and deliver our Korean TVs). And those jobs writing poetry would be just as real and valid as the auto assembly job your dad had in the 1970s. Added value is added value, even if it's just ink on the page—or the Web.
Yes, I've noted the irony that the writing on this website is free.
So America can become the money-shufflers for the world, making our scratch by skimming a small percentage off every banking transaction, investment maneuver, and insurance policy in the world. We might never have to make another car. And so what?
But Allen and Jasinowski continue to confuse manufacturing with the economy as a whole:
As a society, we're not serious enough about competing in the global economy.
Not serious? We are the global economy, baby.
f e e d b a c k
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